MEDIATION between South Africa’s Department of Mineral Resources (DMR) and the country’s Chamber of Mines (CoM) may be the quickest route to settling differences in interpretation of the Mining Charter.
This was after the High Court (Pretoria) today postponed its hearing of an application by the CoM on whether its view of the ‘once-empowered, always empowered’ or ‘continuous consequences’ principle stood in the charter.
The DMR argues that mining firms should be required to re-empower themselves when their black-owned partners divest of their investments in order to continuously maintain 26% black ownership of either listed securities or units of production.
Furthermore, in a potential hammer blow to the CoM’s aspirations to settle the disagreement speedily, the court’s Judge Pierre Rabie said he would consider the merits of joining the chamber’s application with a more radical and separate application to have the charter declared unconstitutional.
This is the application brought by Malan Scholes Inc which differs from the CoM’s application in that it would seek to declare invalid the entire charter which has directed more than R200bn worth of empowerment deals since 2004. The mining charter is policy, not law, argues attorney Hulme Scholes.
Roger Baxter, CEO of the CoM, told reporters on March 13 that he would be prepared to enter into mediation with the government, although quite how a compromise in an apparently insoluble difference of outlook could be forged is anyone’s guess.
Mosebenzi Zwane, South Africa’s mines minister, said on February 8 that: “We believe the chamber will withdraw and settle out of court”. He said he “appreciated” the importance of regulatory certainty in order to attract investment to the South African mining sector.
Citing Chris Loxton, an attorney representing the CoM, BDLive said the two applications were too different to be consolidated into a single case. Leon Bekker, representing another attorney, Hulme Scholes of Malan Scholes, said it would save time for both parties’ applications to be heard in a single court.
The CoM “does not want to see the charter destroyed,” Loxton told Bloomberg News. “Scholes wants to put it to the sword,” which will create a conflict between the two groups, he said.
The CoM had planned on presenting its arguments about the issue of black shareholding on Tuesday, Baxter, told Bloomberg News after court proceedings.
“The delay is obviously something that does affect us,” Baxter said. “This is a critically important issue and our focus is on resolving the issue around uncertainty,” he said.
In a statement issued by the CoM, Baxter said: “We believe we have met the spirit and intent of the Charter’s ownership provisions and it is our view that the DMR acknowledged this by issuing mining rights to mining companies based on their transformation achievements and plans.
“By our calculation, Chamber members have achieved empowerment levels of 38% on average (compared to the 26% target set out by the Mining Charter).The value of empowerment transactions since 2000 amounts to R205bn in 2014 money terms, resulting in meaningful economic value transfer of R159bn.”
The DMR said in May that 90% of the companies achieved the 26% target on an employment weighted basis with an average of 32.5% black ownership. But, when the issue of “meaningful economic participation” was taken into account, only 20% of these transactions complied.
The government and the CoM first sought to have a declaratory order made on a joint application to the court about the once-empowered, always-empowered principle. The government, on legal advice, withdrew its side of the argument, however.
In the meantime, attorneys have over the past 12 months warned against taking the legal route in settling the interpretation of the mining charter.
Nicola Jackson, an attorney at Fasken Martineau, writing for Miningmx in April said that finalisation of the court proceedings would be delayed in the event of third parties bringing joinder applications.
“Any interested and affected party will have the right to bring an application of joinder to the court – in other words, we are looking at (the very least) mining right holders, traditional communities, unions and political parties coming on board,” Jackson said.
“Joinder applications combined with the parties’ exercising their right of appeal could delay the court process for many months (but most probably years). This will only exacerbate the issue of regulatory uncertainty in the sector.”
